Event: The company achieved operating income of 53.21/1,153 billion yuan in 2023/24Q1, up 16.69/ -4.57% year on year; net profit of 3.99/0.93 billion yuan, up 4.75/ -15.68% year on year; net deducted from non-mother of 318/90 million yuan, up 10.04/ 12.31% year on year; basic EPS was 0.6697/0.1561 yuan/share, up 5.05/ -15.58% year on year; plans to distribute 2.02 yuan for every 10 shares, total cash payment for the whole year Dividend of 120 million yuan, dividend payment rate of 30.14%.

Comment: 23Q4 and Kazakh electric equipment, 24Q1 deduction is not a net increase. In November 2023, the company completed a cash acquisition of 51.00% of the shares of Harbin Electric Equipment held by Haden Co., Ltd. and included it in the scope of the consolidated statement. Revenue increased significantly. 23Q4 revenue was 2,284 billion yuan, up 156/144% year on month, gross profit margin of 25.27%, year-on-month increase of -1.09/1.78pcts, annual gross profit margin of 23.96%, year-on-year increase of 0.21pct. The company's annual sales/management/R&D/finance expense ratio was 5.33/3.96/1.59/ 0.26%, a year-on-year decrease of 1.25/-0.51/0.7/-0.57pct, the period expense ratio was 11.14% (-0.87pct), after deducting the non-net interest rate of 5.98% (-2.09pcts), and the weighted average ROE was 12.38% (-0.02pct). In 24Q1, the company's revenue increased 15.22% year on year, decreased 4.57% year on year after retroactive adjustment, net profit without return to mother increased by 12.31% year on year, and profitability increased.

The revenue and profit of Kazakh Electric Equipment grew rapidly. Harbin Electric Equipment and the company are controlled by the Harbin Electric Group. In order to enrich the company's product structure in the field of motors, expand the company's business layout in the field of nuclear power, enhance the company's market competitiveness and resilience in the motor field, and completely resolve peer competition between the company and Kazakh Electric Equipment, the company spent 400 million yuan to acquire 51% of Harbin Electric Control's shares and complete a major asset restructuring. One of the main businesses of electric equipment in Kazakhstan is nuclear power motors. The main nuclear power products include shielded nuclear main pump motors and shaft sealed nuclear main pumps. In 2022, the business achieved revenue/gross profit of 4.49/ 251 million yuan, accounting for 46.35/ 108.74% respectively. In 2023, Kazakh Electric Equipment achieved revenue/net profit of 13.06/88 billion yuan, an increase of 32.90/ 48.05% year-on-year.

It is expected to benefit from the peak of nuclear power approvals. In 2022 and 2023, China approved 10 nuclear power units for two consecutive years, and the number of nuclear power units approved is expected to remain high in the context of a tight balance between electricity supply and demand. The main helium fan produced by Jiadian, a subsidiary of the company, is the only power equipment in the first circuit of a fourth-generation high-temperature air-cooled nuclear power plant. It is the first in China and has reached the international advanced level. Currently, the complete industrialization project for helium fans is under construction, which has completed more than 80%. After delivery, it can produce 6 sets of main helium fan products per year, which can achieve annual sales revenue of 360 million yuan and total profit of 63 million yuan. As one of the important suppliers of nuclear power equipment, the company is expected to benefit from a peak in nuclear power unit approval.

Profit forecast: In 2024-2026, the company's revenue is expected to be 59.38/67.98/7.549 billion yuan, net profit to mother of 449/5.48/645 million yuan, EPS 0.75/0.92/1.08 yuan, corresponding to PE 15.95/13.08/11.11 times PE. First coverage, giving a “buy” rating.

Risk warning: Nuclear power business falls short of expectations, motor business falls short of expectations